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Historic Elections Could Change the Face of Mexico

7 MINS READJun 30, 2018 | 13:08 GMT
Presidential front-runner Andres Manuel Lopez Obrador greets supporters at a rally in Acapulco, Mexico, on June 25, 2018.
(ALFREDO ESTRELLA/AFP/Getty Image)

Andres Manuel Lopez Obrador, the Morena coalition candidate for president of Mexico, greets supporters during a campaign rally in Acapulco, Mexico, on June 25, 2018.

Highlights
  • The populist front-runner Andres Manuel Lopez Obrador appears likely to win Mexico's presidential election on July 1, and his coalition will likely emerge from the congressional balloting in a much stronger position.
  • Lopez Obrador's agenda will depend on his control of Congress. Without at least a lower house majority, he will find it virtually impossible to make good on many campaign promises.
  • Whoever wins the presidency in the July 1 election can be expected to take the same general approach as the previous government to negotiating NAFTA with Canada and the United States. 

Historic elections that could change the political face of the country are fast approaching for Mexico. On July 1 — for the first time since the founding of the modern Mexican state — voters could elect a president outside of the two political parties that have held the post for more than 70 years. That candidate is the populist Andres Manuel Lopez Obrador, who is running as the head of a coalition led by his National Regeneration Movement (Morena). For more than a year, Lopez Obrador has led in the polls, widening his lead as he gained popularity among undecided voters and supporters of the other major parties. Now, he seems poised to win the election with a third to half of the vote, and according to some polls, he could also gain a majority in both houses of Congress, where all 628 seats are up for election. Those majorities would mean that, upon taking office in December, Lopez Obrador would not need the votes of any opposition political party to pursue his agenda. But regardless of who wins, the most pressing foreign policy topic will be the United States and NAFTA.

The Big Picture

Populist Andres Manuel Lopez Obrador appears poised to win the presidency in Mexico, and his coalition is expected make gains in both houses of Congress. His policies remain unclear, but there are clear signs that Lopez Obrador intends to review oil and gas contracts awarded since 2015. Any other aggressive legislative action will depend on whether his coalition seizes congressional majorities.

AMLO: Promises and Reality

Lopez Obrador, who often goes by the initials AMLO, has frequently criticized the private sector in Mexico, as well as the political elites for their supposed acquiescence to corruption. The three-time presidential candidate has turned widespread dissatisfaction with government fraud into political gains over the past two years. But turning his broad campaign promises into action will likely meet with uneven results. Some pledges, such as higher public spending, can be enacted with legislative majorities; others, such as an attack on deep-rooted corruption, could meet more resistance from political opponents. Still, other promises, such as an oil export ban to benefit domestic consumers, will be economically counterproductive and will meet with resistance from technocrats at government ministries.

In the case of corruption, Lopez Obrador has several options for taking a more aggressive approach. The easiest path would involve purging government ministries of employees suspected of irregularities. A more difficult route would be the establishment of a stronger nationwide anti-corruption agency or process capable of investigating and referring cases for prosecution. Even without clear majorities in either house after July 1, his administration could still bring the proposal for such an agency to the floor of Congress for a vote. Because of widespread public resentment against official corruption, it would be politically difficult for the two other major parties, the National Action Party (PAN) and the Institutional Revolutionary Party (PRI), to oppose such a move even if their own elites could eventually be threatened by it.

A chart shows the changes in party composition of Mexico's lower house of Congress over time.

Another big campaign issue for Lopez Obrador is social spending. Though his policies remain unclear, his rhetoric suggests he will try to adjust government budgets to redirect funds to welfare programs. Even without a clear Senate majority, his government could still use a lower house majority to get the Senate to approve his spending priorities. But Carlos Manuel Urzua Macias, who may be his pick for finance minister, appears to support more pragmatic economic and fiscal policies, such as pushing for a quicker resolution to NAFTA talks, delaying a freeze on fuel prices and reining in government spending.

On the business front, a Lopez Obrador presidency could have a big impact on the Mexican private sector and foreign investors. He will almost certainly move to review oil and gas exploration and production contracts awarded since 2015. A longtime critic of the 2013 energy reform, Lopez Obrador will not be able to reverse the constitutional reform that opened the energy sector to private capital. And even with a two-house majority, he may not be able to significantly amend the reform's secondary legislation, because of the subsequent fiscal and economic benefits of rising oil and gas production. But a contract review could allow him to slow or temporarily suspend future bidding rounds, particularly if evidence of corruption is uncovered. Despite this risk, foreign investors appear to have bet on Mexico in the long term by snapping up exploration and production areas in 2017 and 2018.

A chart shows the changes in party composition in Mexico's Senate over time.

NAFTA and the U.S. Elephant in the Room

On the foreign policy front, Mexico's biggest challenge under a new president will likely be the successful completion of negotiations on the North American Free Trade Agreement with the United States and Canada. Concerns about other aspects of Lopez Obrador's foreign policy — suggestions that he would antagonize Washington by negotiating with criminal groups or would alter the country's military-dominated domestic security policy — are likely unfounded. But whoever wins the presidency will have to face the NAFTA negotiations in some form or another. The discussions could even be headed toward completion before a new president takes office — assuming that Mexico and Canada agree to U.S. demands, such as more stringent rules of origin for the automotive sector or a sunset clause for the agreement. 

Or the trade negotiations could head down a rockier path. The administration of U.S. President Donald Trump could stick to its hard-line demands and threaten to withdraw from the agreement. In that case, Mexico City and Ottawa would probably wait and hope that the U.S. Congress would restrain the White House's power to undo the agreement. If Congress steps in, a withdrawal may be beyond the administration's power, and the White House may decide that it is not in its political interests to fight for it ahead of 2018 midterm elections and the 2020 presidential vote.

A bar chart shows the U.S. goods trade deficit with Mexico over time.

Despite whoever is elected president, Mexico is still likely to take the same broad approach toward NAFTA negotiations, assuming they are still going on in December. In Mexico, the deal is widely regarded by the country's elites as being economically beneficial, so even a Lopez Obrador administration would try to preserve the trilateral deal. However, enough uncertainty remains in the talks that a satisfactory conclusion for Mexico is still in doubt. With negotiations effectively stalled, Mexico is looking, at best, at a prolonged limbo, which draws out the uncertainty for foreign investors and Mexico's private sector. At worst, Mexico's economy could suffer if the Trump administration moves ahead with Section 232 tariffs on automobile imports or moves to end U.S. membership in NAFTA.

If Lopez Obrador wins on July 1, his initial impact on Mexico's political scene will depend on his margin of victory and on whether he controls any houses of Congress. Any major gains by the Morena coalition in the Senate and lower house would likely drive the PAN and PRI into a rapid alliance to fend off Lopez Obrador's legislative advances. If his coalition takes majorities, the opposition's options will be much more limited. It will have to rely on the federal court system to slow any legislation it deems controversial, including attempts to amend the 2013 education reform, to enact laws to implement a cease-fire with criminal groups or to rewrite parts of the 2014 secondary laws for the energy reform. Nevertheless, the future for Mexico starts at the polls.

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